Thursday, October 2, 2008
Potentially massive naked shorting scam uncovered?
There's a very long story behind this. Basically a bunch of Wall Street insiders have been using naked shorts for years to line their pockets. With a traditional short sale, traders borrow shares and sell them in the hope that prices will drop. A naked short works much the same way - except the shares aren't actually borrowed. They're sold but not delivered. Widespread and deliberate naked shorting can artificially deflate stock prices, flooding the market with what amounts to counterfeit shares. The US financial media and some major banks are implicated in this scandal. There might be nothing behind this story, or it could be so huge that some top people come down. Or there could be the mother of all cover-ups. Watch this space.